Duties, Powers and Functions of the Authority: Complete Notes

This note brings together the provisions that give PFRDA its regulatory power: its statutory duty and functions, its power to issue directions, investigation and search and seizure, cease and desist orders and management by an Administrator, and the framework of rules, regulations and delegation through which the Act is worked out.

1. Duty, Powers and Functions (Section 14)

PFRDA's duty under Section 14(1) is to regulate, promote and ensure orderly growth of the National Pension System and pension schemes under the Act, and to protect the interests of subscribers, subject to the Act and other laws.

• Inclusive list of powers (Section 14(2)): regulating the NPS and schemes; approving schemes and investment norms; registering and regulating intermediaries and issuing, suspending or cancelling certificates; ensuring safety of contributions and reasonable costs; grievance redressal; promoting professional bodies; adjudicating disputes between intermediaries and subscribers; data and research; subscriber education; standardising performance information; regulating regulated assets; levying fees; prescribing accounts; information, inspection, inquiry, investigation and audit; and prescribed functions.
• Civil court powers (Section 14(3)): for inspections and inquiries, discovery and production of documents, summoning and examining on oath, inspection of records anywhere, and commissions.
• Interim measures (Section 14(4)): for written reasons, restraining persons from schemes or office, impounding proceeds, attaching bank accounts with the approval of a Judicial Magistrate of the first class for up to one month, and freezing assets, with a hearing before or after the order.

2. Power to Issue Directions (Section 15)

After an inquiry, if satisfied it is necessary in the interests of subscribers or orderly development of the NPS, to prevent detrimental conduct, or to secure proper management, the Authority may issue such directions as it deems fit to intermediaries, persons required to register under Section 27, and persons associated with the pension fund, individually or as a class. A hearing is required before or after the order. The power is subject to Section 14, so it cannot bypass the safeguards on interim measures. Section 15 directions run from the Authority to the regulated; Section 43 directions run from the Government to the Authority on policy.

3. Investigation (Section 16)

• Trigger: a reasonable ground to believe that a pension fund is acting to subscribers' detriment, or that the Act, rules, regulations or directions have been violated.
• Investigating Authority: any person appointed by written order, who reports to the Authority.
• Duties and powers: officers, intermediaries and associated persons must preserve and produce records and furnish information; documents may be kept for six months; persons may be examined on oath, with signed notes usable in evidence.
• Obstruction (Section 16(7)): imprisonment up to one year, fine up to ₹25 crore, or both, plus up to ₹10 lakh per day of continuing default.

4. Search and Seizure (Section 17)

• Grounds: on information giving reason to believe in non-production of documents, likely non-production, a contravention by an intermediary, claims settled too high or too low, illegal fees, or likely tampering with documents.
• Officer: an officer of the Authority not below Gazetted rank, who may enter, search, break open receptacles, seize, and mark or copy documents.
• Safeguards: police assistance, prohibitory orders where seizure is impracticable, examination on oath, a 180-day retention limit extendable only with written reasons and approval, copies for the owner, objection to the Central Government, and the criminal procedure code governing searches. No prior Magistrate's approval is required, unlike SEBI searches.

5. Cease and Desist and Administrator (Sections 18 and 19)

• Cease and desist (Section 18): after an inquiry, if any person has violated or is likely to violate the Act, rules or regulations, the Authority may order him to cease and desist from committing or causing the violation. The order is remedial and preventive, separate from penalties and prosecution.
• Administrator (Section 19): if the CRA or a pension fund acts prejudicially to subscribers, the Authority hears it and reports to the Central Government, which may appoint an Administrator to manage it under the Authority's direction and control, as specified by notification.
• Graduated enforcement: inspection, directions, investigation, interim measures, cease and desist, penalties and cancellation, administration and prosecution, chosen in proportion to the problem.

6. Rules, Regulations and Delegation (Sections 49 and 51 to 54)

• Rules (Section 51): made by the Central Government on members' pay, additional functions, civil court powers, search procedure, SAT appeals, accounts and returns; the Act calls these matters "prescribed".
• Regulations (Section 52): made by the Authority, consistent with the Act and rules, on meetings, staff, schemes, withdrawal, exit and annuity, the CRA, points of presence, pension funds, registration, inquiries, Administrators, the Subscriber Education and Protection Fund, committees and the NPS Trust; these matters are "specified".
• Parliament (Section 53): every rule and regulation is laid for thirty days; both Houses may modify or annul it, without affecting past acts.
• Delegation (Section 49): to any member, officer or other person, and to committees of members, except the power to make regulations.
• Removal of difficulties (Section 54): Government orders consistent with the Act, laid before Parliament, available for five years from commencement (to February 2019).

7. Comparative Perspective

PFRDA's enforcement toolkit is closely modelled on that of SEBI under the SEBI Act, 1992: inclusive functions, civil court powers, interim measures, directions, investigation, search and seizure and cease and desist orders all have SEBI counterparts, and appeals from both regulators lie to the Securities Appellate Tribunal. The power to install an Administrator draws on the banking and insurance models, reflecting the fact that a pension fund holds long-term savings on behalf of subscribers who cannot easily protect themselves.

8. Related Topics and Provisions

• The Authority: establishment, members and Central Government control
• Registration of intermediaries (Section 27)
• Penalties, adjudication and offences (Sections 28, 30 and 32)
• Appeals to the Securities Appellate Tribunal and the Supreme Court (Sections 36 and 38)